How To File Your Income Tax Return
Tips & Instructions for Preparing & Filing Your 1040 Return
The IRS recently took steps to overhaul the Form 1040 tax return, and has eliminated Form 1040A and Form 1040EZ in the process. The old 1040 Form (a.k.a. “the long form”) is being replaced by a condensed, postcard-sized version designed for all taxpayers to use – there are no longer any “short forms” for individuals with simple tax situations. There are also several new schedules/forms that have been created, which must be attached to your 1040 return if you are subject to certain taxes or want to claim particular tax breaks.
The New IRS Tax Form 1040 (U.S. Individual Income Tax Return)
Form 1040 is the standard federal income tax form that individuals use to report their annual income to the IRS.
How to Obtain Form 1040
There are many different ways to obtain Tax Form 1040. The fastest and most convenient option is to download the tax form on your computer (see links below). Most Post Offices and local public libraries carry paper forms around tax time, and forms can also be picked up from a tax center or an IRS office. In addition, you can contact the IRS and request a tax form to be sent to you by U.S. Mail.
Links to PDFs:
Deadline for Form 1040
IRS Tax Form 1040, with payment, is due by April 15th (unless that date falls on a legal holiday or weekend, which moves the filing deadline to the next business day).
A six-month tax extension may be granted (with IRS Tax Form 4868) for late filing, but payments must still be made by the original due date (typically April 15th).
For more IRS due dates, including filing and payment deadlines, see the 2019 Federal Tax Calendar.
Filling Out Your Income Tax Return, IRS Form 1040
Before you begin filing your 1040 tax form, you should have the following information ready:
- Proof of identification
- Filing status and residency status
- Social Security Numbers for you, your spouse, and any dependents
- Dates of birth for you, your spouse, and any dependents
- A copy of your past year tax return
- Statements of wages earned (e.g., W-2, W-2G, 1099-R, etc.)
- Statements of interest/dividends from banks, brokerages, etc.
- Proof of any tax credits, tax deductions, or tax exclusions
- Your bank account number and routing number (for Direct Deposit of your tax refund)
Here are line-by-line instructions to walk you through the process of filling out the different sections of the Form 1040 tax return:
There are five federal filing statuses, based on marital status and other conditions. They are: Single, Married Filing Separately, Married Filing Jointly, Head of Household, and Qualifying Widow(er) with Dependent Child. You may qualify for more than one filing status, in which case you will have to make a choice. In that situation, you can choose the filing status that will result in the lowest tax.
Name, Address, & SSN
You need to provide your name, address, and Social Security Number (SSN). Note that a missing or incorrect SSN can result in slower processing of your tax return, an increase of tax, a delayed tax refund, or a reduced tax refund. If you are a resident or nonresident alien, provide your Individual Taxpayer Identification Number (ITIN) wherever your SSN is requested.
Health Care Coverage
On the new Form 1040, you must check the box for health care coverage (on Page 1 of the return) to indicate that you were covered by qualifying health insurance during 2018. You can also check this box if you are eligible for a health care exemption for 2018. But if you did not have full-year health insurance coverage, you will probably need to fill out an additional schedule/form and attach it to your 1040 return. Individuals who cannot check the “Full-year health care coverage or exempt” box on the front of Form 1040 are penalized and must generally report a shared responsibility payment on Line 61 (Page 2 of Form 1040). If you can claim any exemptions, you should use IRS Form 8965 (Health Coverage Exemptions). For information about exemptions and calculating the shared responsibility penalty, see the Instructions for Form 8965.
The 1040 Form allows you to enter up to four dependents. If you have more than four qualified dependents, you will need to add another page to your tax return. Note that all of the personal exemption amounts have been eliminated for tax year 2018 through tax year 2025. Therefore, this section has been removed from the 1040 return altogether. If your dependent qualifies for the Child Tax Credit, you should check the corresponding box. If you have a dependent person who doesn’t qualify for the Child Tax Credit, he/she may still qualify you for the new Credit for Other Dependents.
The IRS defines “income” as any money that you receive during the given tax year. Most people can simply review their W-2s (Wage and Tax Statements) to determine their annual income. Taxable income, generally speaking, is the gross income of an individual or corporation, minus any allowable tax deductions. It’s important to realize that taxable income can encompass more than just your annual salary.
Taxable income can include profits from stocks or real estate sales, as well as winnings from the lottery, betting on horse races, or any casino (domestic or abroad). Even the cash value of bartered items is considered taxable income. Income that may be part of your gross income but is not identified as “taxable income” may include: child support, proceeds from life insurance policies, inheritances, Workers Compensation payments, Welfare benefits, compensation awarded as a result of physical injury, education scholarships or grants, and income paid to your retirement account (either a 401k or IRA, up to a certain amount).
Overall, taxable income is that portion of your gross income that’s subject to taxation by the government, minus any allowable itemized or standardized deductions. Your taxable income is basically the amount of your income that is subject to income tax. For more information, see IRS Publication 525 (Taxable and Nontaxable Income).
In general, you are required to report all of your income to the IRS – except income that is exempt from tax by law. On Line 1 of Form 1040, you should enter the total of your wages, salaries, tips, etc. If you are married filing a joint tax return, you must include your spouse’s income as well.
Adjusted Gross Income (AGI)
Your adjusted gross income is your gross income from all taxable sources, minus certain allowable tax deductions. These “allowable deductions” (also known as “above-the-line deductions”) may include unreimbursed business expenses, medical expenses, alimony, moving expenses, or deductible retirement plan contributions.
Your AGI is important when determining your overall tax liability because it can affect your income tax bracket, how much you can contribute to qualified retirement accounts, and which tax credits you qualify for. On the other hand, “gross income” refers to all income that you received in the form of money, goods, property, and services that is not exempt from tax. This can include any income from sources outside of the United States, as well as income from the sale of your home.
Tax Deductions & Tax Credits
If you qualify for any tax credits or tax deductions, you will want to take advantage of them. Tax deductions reduce your taxable income and tax credits reduce the actual amount of tax that you owe. Both will increase your chance of receiving a tax refund. Make sure you understand how to properly claim any income tax benefits, as mistakes will delay the processing of your return.
Tax deductions lower your taxable income and they are equal to the percentage of your marginal tax bracket. For instance, if you are in the 25% tax bracket, a $1,000 deduction saves you $250 in tax (0.25 x $1,000 = $250).
Tax credits, on the other hand, provide a dollar-for dollar reduction of your income tax liability. For instance, a $1,000 tax credit actually saves you $1,000 in taxes. A tax credit is always worth more than a dollar-equivalent tax deduction, because deductions are calculated using percentages. Referring to the numbers above, you can see that a $1,000 credit offers $750 more in savings than a $1,000 deduction.
Standard Deduction or Itemized Deductions
There are two main types of tax deductions: the standard deduction and itemized deductions. You are allowed to claim one type of deduction on your tax return, but not both. For instance, if you claim the standard deduction, you cannot itemize deductions – and vice versa (if you itemized deductions, you cannot claim the standard deduction). You are allowed to use whichever type of deduction results in the lowest tax.
The standard deduction is subtracted from your Adjusted Gross Income (AGI), which means that it reduces your taxable income. For tax year 2018, the standard deduction amounts are as follows:
Married Filing Jointly or Qualifying Widow(er)
Married Filing Separately
Head of Household
Note that there are some special circumstances when it comes to the standard deduction, and there are check boxes for these situations on Page 1 of Form 1040. For details, see the Instructions for IRS Form 1040.
You should report the amount of your standard deduction or itemized deductions on Page 2 of Form 1040 (Line 8).
Child Tax Credit & Credit for Other Dependents
You may be eligible for the Child Tax Credit if you have a qualifying child under age 17 and you meet other IRS requirements. The maximum amount allowed for this tax credit is $2,000 for each qualifying child. But you should also note that up to $1,400 of the credit (per qualifying child) is refundable as the Additional Child Tax Credit. A refundable tax credit can reduce your tax liability below zero, resulting in a tax refund for you.
There are currently two sections where you report information about your qualifying child and claim the Child Tax Credit – on the front (Page 1) and the back (Page 2) of Form 1040. Page 1 is where you enter information about your dependents; and if your dependent qualifies for the Child Tax Credit, you should check the corresponding box. Page 2 is where you enter the amount you’re claiming for this credit, on Line 12(a).
If you have a dependent person who does not qualify for the Child Tax Credit, he/she may still qualify you for the new “Credit for Other Dependents.” This non-refundable tax credit is worth up to $500 for each qualifying dependent (other than children who can be claimed for the Child Tax Credit). The Credit for Other Dependents is calculated and reported along with the Child Tax Credit on your 1040 return.
The Alternative Minimum Tax (AMT) is an extra tax that some people are required to pay in addition to their regular income tax. The main goal of the alternative minimum tax is to prevent high-earners from using tax strategies and special benefits to greatly decrease their tax liability. Over the years, however, the alternative minimum tax has changed quite a bit. Currently, it affects many taxpayers – including those who do not have very high income. There are several things that can cause alternative minimum tax liability. The most common AMT triggers include: personal exemption, medical expenses, incentive stock options, tax-exempt interest, and long-term capital gains.
Self-Employment Tax (also called “SE tax”) is a Social Security and Medicare tax aimed mainly at individuals who are self-employed. The SE tax payments you make go towards your coverage under the federal Social Security system. Social Security coverage essentially provides retirement benefits, disability benefits, health care benefits (Medicare), and survivor benefits. Note that whenever SE Tax is mentioned, it generally only refers to Social Security and Medicare taxes, and does not include any other taxes that self-employed individuals may be subject to.
Federal Income Tax Withheld, Other Tax Payments, & Refundable Credits
Withholding tax (also known as “payroll withholding”) is essentially income tax that is withheld from your wages and sent directly to the IRS by your employer. In other words, it’s like a credit against the income taxes that you must pay for the year. By subtracting this money from each paycheck that you receive, the IRS is basically withholding your anticipated tax payment as you earn it – sometimes called “pay-as-you-earn” taxation. While you cannot avoid withholding tax altogether, you can control the amount that is withheld from each paycheck when you fill out your W-4 tax form.
Estimated tax is the method that individuals and businesses use to pay tax on their income that is not subject to withholding. This may include income from self-employment, interest, dividends, alimony, rent, gains from the sale of assets, prizes, and awards. You also may have to pay estimated tax if the amount of income tax being withheld from your paycheck (salary, pension, or other income) is not enough. Estimated tax payments are typically made in quarterly installments using IRS Form 1040-ES, which can be filed electronically or by paper mail.
The Earned Income Credit (EIC) — also called the “Earned Income Tax Credit” (EITC) — was created to help low-income workers, self-employed individuals, and their families. The Earned Income Tax Credit is being utilized by more taxpayers than ever—some for the first time–as a means to offset their loss of (or reduction in) income. The Earned Income Tax Credit can result in either a tax credit to offset income tax due or a tax refund.
There are also several tax credits and tax deductions for educational expenses, whether you are attending a four-year college or just taking a course to benefit your current job. The money you spend on tuition, enrollment fees, books, supplies, and housing costs for education can add up to big savings on your tax return. The most valuable tax breaks for education are in the form of tax credits. There are two main education tax credits offered by the IRS: the American Opportunity Tax Credit (AOTC) and the Lifetime Learning Credit. Both of these credits can be applied to your tax liability directly and reduce what you owe, but only one can be used per individual and they each offer different benefits.
A tax refund is issued when the amount of income tax that you paid is more than what you actually owed for that year. The IRS has an electronic system in place, called “Where’s My Refund? – It’s Quick, Easy, and Secure.” This is an online tool that can help you determine the status of your tax refund using the Internet. If you filed electronically, you will receive information about your refund within 72 hours after the IRS acknowledges receipt of your e-filed tax return. If you file by paper mail, it will take the IRS longer to process your tax return and you will not able to use the “Where’s My Refund?” system for at least 3 weeks.
Amount You Owe
Individuals have many different options for paying their federal income taxes. You can pay electronically (online) with a credit card, debit card, or e-check (electronic check). Or you can pay your taxes by phone or by paper mail with a check, money order, or cashier’s check. Additionally, if you wish to pay in cash, there is an option for that as well. Whether you are filing late and/or paying late, the IRS urges taxpayers to pay their bill in full. It is always recommended that you pay as much of what you owe as you can, and as soon as you can. The longer you wait, the more late fees and interest charges that can accrue.
Installment Agreement – If you cannot pay the full amount due with your income tax return, you can ask the IRS if they will allow you to make monthly installment payments for the full amount or a partial amount. However, keep in mind that you will be charged interest and also possibly a late payment penalty on the tax not paid by the date your return is due, even if your request to pay in installments is granted.
Estimated Tax Penalty
You may have to pay this penalty if you didn’t pay enough estimated tax by any of the IRS due dates. Or you may owe this penalty if Line 22 on your Form 1040 is at least $1,000 and is more than 10% of the tax shown on your return.
Sign Your Return
The 1040 tax form is not valid unless you sign it. If you are filing a joint tax return, your spouse must also sign the form.
Third Party Designee
By checking this box, you are authorizing another person (tax preparer, family member, friend) to discuss your tax return with the IRS. Note that you are not authorizing the designee to receive your tax refund, bind you to anything, or represent you before the IRS.
Assemble Your Return
Make sure you gather all the appropriate documents (your 1040 form, plus any attachments or schedules) needed to file your return.
Filing Your Income Tax Return with the IRS
You may file Form 1040 by paper mail, by using IRS e-file, or through an approved tax preparer. Filing taxes online is generally faster, easier, and more secure – and you will get your tax refund much sooner if you choose the Direct Deposit option.
Decide Which Filing Method Is Best for You
You typically have three main tax filing options: paper filing, tax preparation software, or hiring a professional.
Tax Preparation Software
Tax preparation software is becoming more and more popular for many reasons. Most tax preparation programs will be able to answer any questions you may have. Additionally, much of the software is built to help you take advantage of as many tax deductions and tax credits as possible.
When you hire a professional to prepare your federal income tax return, you are generally cutting out all of the “guesswork.” You can be confident that your return is accurate and that you are saving as much money as possible. The downside to this is that you will pass the control to the tax professional, and of course, you have to pay for this tax preparation service.
Traditional Paper Filing
Even in today’s day and age of digital technology, many people still feel more secure preparing taxes with good old pen and paper. With paper filing, you are in charge of every detail from start to finish – but there is no immediate tax help available.
Traditional Mail vs. Online Filing
Those who are filing a paper tax return will need to mail it to the IRS upon completion. On the other hand, if you are using tax preparation software or filing through a tax professional, electronic filing may be a better option. Tax returns that are submitted electronically are often processed faster, which means a faster tax refund for the taxpayer.